Millions Slip by Tax Loopholes
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- Category: The Nation
- Published on Tuesday, September 06 2011 05:51
- Written by Rod Hughes
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If lawmakers really wanted a tax reform that would nearly balance the national budget, they would close tax loopholes in current Swiss cheese regulations, two recent studies show.
Both researchers from the National University and the Comptroller General's office agree -- if exonerations were eliminated, Tributacion Directa (the equivalent of British Inland Revenue and the IRA of the United States) would collect 5.8% of the Gross Domestic Product.
This is more than twice what the Legislative Assembly (2.1% of the GDP) hopes to collect with the current tax reform bill. But it would also entail a number of politically unpopular choices.
Already, a tax on cooperatives has been hacked from the bill in its second version because leftist parties would not go for it. This would include a number of small companies made up of tiny businesses but also would include a few big ones like the Dos Pinos dairy giant which carries political clout in abundance.
Other exonerations probably would not collect much revenue individually but if all were eliminated would contribute a tidy sum. For instance, the exoneration on the sale of matches is obsolete, probably stemming from an era in which poor rural families cooked with wood. And kindling itself as exempt.
As a La Nacion article pointed out, nearly all services and 919 products are exempted, including hog lard, coffins and insect repellent. (The animal fat is probably a holdover from the days when the food of the poor, rice and beans (gallo pinto), was fried in the lard. Today a diet-conscious generation largely ignores it in favor of less saturated cooking oils.)
Business activities getting a free pass on income tax include associations, duty free zones like Golfito and, of course, cooperatives. But workers also get by with their Christmas bonus and parents with aid to high school students with getting taxed.
Testifying Aug. 3 before the Financial Affairs Committee of the Legislative Assembly wrestling with tax reform, Comptroller General Rocio Aguilar pleaded with lawmakers to consider the impact of current exonerations as well as to examine closely future bills that include the same benefits.
Essentially, she asked, "Can we afford them?"
Note: Results of the National University (Universidad Nacional) study in detail may be found on its Escuela de Economia Web page. (Spanish) That study was made with cooperation of the Ministry of Finance.